GOLD plate (noun) – to cover something with a thin layer of gold –
attempt, often by those with a political agenda, to pile extra regulation on
banks to appease an angry public.

At 3.30pm on Monday, the Chancellor will rise to his feet in the House of Commons and deliver in comprehensive detail the Government’s response to Sir John Vickers’ Independent Commission on Banking. The document that will be published at the same time will be 80 pages long and will go through each recommendation the ICB made on constructing a safer British banking system. It will include a timetable for implementation and pledge that all primary and secondary legislation will be passed before the end of this Parliament – that is, 2015.

If nothing else, the City will at least now be able to see the colour of George Osborne’s money. They might not like the hue but, with uncertainty one of the major risk factors at present afflicting the financial services sector, any fresh evidence about the Government’s intentions will come as some relief. The dog is finally to get sight of the rabbit.

Some muted cheers may also be reserved for the plans to make the UK high street banking sector more competitive. Mr Osborne will announce the latest proposals on allowing bank customers to switch accounts far more easily than is possible at present. The Treasury is certainly a little frustrated that the ICB’s proposals on competition were largely overlooked when it published its final report last September. Some may murmur quietly that was because that section of the report did not amount to much.

The main course tomorrow will, of course, be the Government’s thoughts on the major structural changes the ICB proposed for the UK’s banking sector. This brings us to the knotty problem of the ring-fence, Sir John’s halfway house solution to the structural separation of retail banking and investment banking.

Under the ICB’s plan, retail operations would be protected behind a “fence” and would have a separate funding structure including equity capital of at least 10pc of risk-weighted assets. There would also be limits on leverage and separate boards.

As Sir John said in his opening comments when launching the final report, only ring-fenced banks would be allowed to supply “core domestic retail banking services of taking deposits from ordinary individuals and SMEs and providing them with over-drafts”.

Within the ring-fence, certain banking functions would be prohibited, such as trading, operating derivatives and supplying services to non-European customers.

The ICB’s argument is that such a separation will end once and for all the “too-big-to-fail” conundrum – the fact that it is the taxpayer who ultimately has to carry the burden if a universal bank fails. Its central argument, which the Treasury agrees with, is that such is the size of the UK’s banking sector compared to UK GDP we need special measures to protect us from catastrophe. That the probability of catastrophe might be increased by the ring-fencing proposals – such banks will not be able to port funds to help liquidity issues – seems to have passed everyone by.

Other special measures unique to the UK include higher levels of loss-absorbing capital (bail-in bonds) than presently proposed by the international Basel III requirements.

It is such “super-equivalence” – the idea that Britain needs extra protection not contemplated anywhere else in the world – where Mr Osborne’s argument comes unstuck. When the Chancellor first launched the ICB process with a view to finally settling the matter of banking reform, it appeared that the UK was bouncing back from recession. Gloom has since descended.

The Government will admit that the ICB’s structural reforms will increase costs for banks – some argue by as much as £10bn a year though the Government estimate will be nearer £7bn. This is money that could otherwise be circulating in the economy. As Vicky Pryce, the former government economist, argues, this is not a time for costly reform.

Despite the size of the banking sector, all the stress testing of the UK’s banks has revealed that they are in better shape than their European counterparts and certainly those of France and Germany. Neither of those countries is contemplating similar reforms. Further, the work of Basel III, resolution regimes and the international Financial Stability Board is already tasked with solving the “too-big-to-fail” problem. Why the Government feels the need to “front-run” such international agreements – to the detriment of one of the UK’s few world-leading industries – has not been explained.

There is also the issue of regulatory overload. As the old saying goes, when a regulator sees light at the end of the tunnel, its response is to build more tunnel. An opportunity has been missed here – rather than adding more rules the ICB process could have been an opportunity to ensure that the present rules are working transparently, coherently and, most importantly, are being used. As the Financial Services Authority’s report on RBS revealed last week, the authorities could have halted the disastrous acquisition of ABN Amro, but chose not to. The ICB was not tasked with looking at broader failures in the financial services sector. It should have been.

Coincidently, the Lords and Commons joint committee inquiry into macro-prudential regulation will also be published tomorrow. It will raise serious concerns about putting the Governor of the Bank of England in overall charge of the financial regulatory system. The Bank has published nothing about its role in the financial crisis. Transparency is not its strong suit.

There are certainly problems in the financial services sector, more to do with failures of governance and action rather than failure of the actual regulatory rules. The Government should have been brave enough to say so and put the ICB to rest. That it hasn’t is more to do with politics and pandering to the gallery than the proper functioning of the City.

Retail victory for police

After the Battle of Fortnum & Mason last March, when demonstrators stormed the venerable institution on Piccadilly and forced its closure, retailers rightly expressed their anger. The police should have done far more to allow shops to go about their legitimate business without fear of reprisals from mobs of people who have decided that they are uniquely placed to adjudicate on who should shop where.

What a difference nine months and a new Metropolitan Commissioner has made. The latest demonstrations yesterday resulted in no shop closures, police out in numbers and arrests. Bernard Hogan-Howe, the new police chief, should be congratulated.

You can contact Kamal Ahmed about his column at kahmed@telegraph.co.uk and follow him during the week on Twitter at @kamalahmed1